Sensex sees 1,500-point swing on gains in European and US futures market

Gains in European, US futures help index stage a comeback

The benchmark Sensex tumbled nearly 1,200 points in opening trade on Friday, following Thursday’s near-7-per-cent drop in the US markets on concerns of a second wave of infections.

However, it saw a dramatic rebound later, thanks to gains in the European and US futures market.

The Sensex closed at 33,781, up 243 points or 0.72 per cent. In a volatile session, the index swung 1,508 points, touching an intra-day low of 32,348 and high of 33,856. The Nifty ended at 9,973, up 71 points or 0.72 per cent. It scaled a low of 9,544 and high of 9,996 during the session.

The indices had seen similar volatility in the previous two sessions, too. Market players said that following a 15-per-cent jump from their mid-May levels, the indices are finding it difficult to find an equilibrium point.

Experts say that while many stocks have “overheated” following sharp gains in recent weeks, global liquidity and aggressive stimulus measures have, at the same time, kept the pot boiling.

 

 

“Monetary policies globally have remained expansionary, which is supportive of risk assets. The Fed is ramping up asset purchases and though it has ruled out the scope for negative interest rates, real US rates have still turned negative. Similarly, UK sovereign yields indicate negative interest rates, going ahead. Bank of Japan and the European Central Bank will also persist with balance sheet expansion,” said Amar Ambani, senior president and head (institutional research), YES Securities.

However, easy-money trade was seen faltering as the Dow Jones index plunged 6.9 per cent on Thursday — the most since March 16 — amid concerns that the markets had overheated, coupled with fears of a second wave of infections.

Commentary from the US Fed that the road to economic recovery would be long-drawn further weighed on sentiment.

However, Thursday’s fall seemed to be a minor hiccup as the US future rose 2 per cent, indicating a strong rebound on Wall Street.“Weakness in global markets led to a feeble start, but gradual recovery in index majors not only helped the benchmark recoup losses but also close around the day’s high. It all started with the US Fed statement. However, the recovery shows that participants are still buoyant on growth prospects,” said Ajit Mishra, vice-president (research), Religare Broking.

RIL and HDFC Bank made the biggest positive contribution to the index. RIL rose 3.3 per cent while HDFC Bank gained 1.5 per cent.

The broader market continued to outperform, with the Nifty MidCap 100 gaining 1.3 per cent. The India VIX, a gauge for volatility, surged 4 per cent to 30.82. The Sensex posted its first weekly loss in four weeks.

Revival at Wall Street

World shares opened higher on Wall Street a day after major indices slumped more than 5 per cent. The S&P500 rose 2.6 per cent in early trade, on track for a weekly loss.

Small-company stocks and bond yields rose — both signs that pessimism on the US economy was easing. European markets also rose, but Asian indices ended the session broadly lower.